Being A Good Business

Chicago Summit

Last week, 80 entrepreneurs joined our Chicago StartUp Summit at the new Virgin Hotels to learn from inspiring speakers, take part in interactive workshops and share experiences with other entrepreneurs. As part of the event, President of Northrop Nonprofit Consulting, Gayle Northrop spoke about what it means to run a socially good business.

Read Gayle’s thoughts on why it’s good business to be a good business…

Some of the entrepreneurs attending the Chicago StartUp Summit may have been skeptical about the idea that social action drives good business, whereas others were already living it. Entrepreneurs these days are constantly thinking about a long list of Ps – product, price, place, promotion and of course, profit – so suggesting that the list must grow is often met with hesitation. My job is to convince the unconvinced that for the good of a business, some additional Ps must be added– people and planet.

People and planet need to be acknowledged in the early stages of a business launch, even before there’s revenue or profit to play with. Entrepreneurs must adopt a socially good business model early – since they work best when it’s baked into the DNA of a company. Business elements such as product development, supply chain set up and the shaping of corporate culture should be weaved into the fabric from day one.

The question is often asked – ‘Isn’t being a socially good business more expensive’? The answer is – it can be, but doesn’t have to be. There is an ever growing list of business practices that prioritise people and planet, that cost less, and that generate more revenue.

A variety of business sectors are now taking social action in new, innovative ways – with the participating businesses reaping significant rewards. Locally-sourced food will often cost less than products shipped for long distances, and it leaves a lighter environmental footprint. Using less energy or water in the manufacturing process saves money. And research out of Ohio State University shows that customers are often willing to pay a premium – in some cases up to 25% – for humanely raised animal products.

So what comes first, the ‘socially responsible’ part or the ‘successful business’ part’? Theoretically they go hand in hand, but entrepreneurs must be careful not to miss the point – a socially responsible business is still a business. It must start with a quality product or service that customers want to buy. Only with a solid customer value proposition can sustainable enterprise be created. With a sound business as the foundation, the socially responsible elements can play out anywhere along the company supply value chain.

Let’s take, for example, Kimberly Clark and Patagonia. Kimberly Clark developed a product – a tubeless toilet paper roll – to stem the flow of over 17 billion toilet paper tubes to landfill each year. Patagonia took the time to carefully consider their supply chain – not only using recyclable materials in products, but recycling clothes themselves. Both businesses crafted their socially sound business practices around a solid, desirable business idea. Everyday actions are the ones that need consideration – the elimination of plastic water bottles, going paperless, recycling printer cartridges, incentivizing employees to carpool, ride a bike or take public transit to work – these things have a measurable effect on the ‘P of planet’.

Every business can (and should) be a good business for its employees. Market leading examples of how the prioritisation of people is benefiting the bottom line, are evident all over the world. FromImpact Recyclers employing only difficult to hire employee populations, to Costco paying well above minimum wage and industry standards, to companies offering retirement savings plans, health insurance, equity, tuition assistance and paid time off for volunteer service. All of these offerings contribute to the ‘people’ part of the equation and often result in reduced turnover, higher morale, and increased productivity all which ultimately affect the bottom line.

So, were the entrepreneurs at the Chicago Startup Summit convinced it’s good business to be a good business? We’ll know for sure when we see their successful enterprises hitting all the Ps, including people and planet. And thankfully, we’ll all be better off the harder they try.

– Gayle Northrop is President of Northrop Nonprofit Consulting, teaches social entrepreneurship at the UCLA Anderson School of Management, and a part-time social entrepreneur.

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